General News
CIOs and IT Departments: Profit Centre or Profit Center?
In business, an operating unit is either making money or it’s detracting from a company’s profits. In simple terms, it’s the difference between a profit center and a cost center.
IT Departments worldwide face the difficult task of demonstrating the ROI that they provide to their parent companies.
IT Departments provide essential support services to other departments within a company, however; these contributions are often not easily quantified into revenue.
Most IT departments traditionally function as cost centers, a business model in which funds are invested but an obvious return on investment is not easily visible.
There’s an increasing need to transform IT Departments into a revenue contributing business. The impact of IT on business is deep, pervasive, and growing.
We literally can’t separate IT and general business. The better any company exploits technology, the better they are at their jobs, knowing customers, working with partners, capturing markets, growing profits.
IT is being called on to transform business, and to do so IT must transform itself, too.
As the developing markets e.g. Nigeria matures, executives becomes wiser and sees the need to focus more on their core business.
And these we have seen with decreasing IT budgets, or outright outsourcing of all IT function. We can broadly say that enterprise in Africa are at a cross-road and are facing typical business challenges – which are changing the way IT function is organized.
Then Role of CIO is also changing – with the change in the IT requirements and model of IT engagements. IT is getting more and more aligned to business functions – and is seen as a critical enabler for conducting operations.
Traditionally enterprises in the Africa have taken a CAPEX centric approach, – however they now starting to realize the need for and benefits of – OPEX based models.
What this means is that organizations are looking at means to improve ways in which business is conducted.
This may be true for all functions within an organization like Supply Chain, sales and marketing etc.
In the current context of business transformation, including IT departments, CIOs need to innovate in order to stay relevant. Based on survey amongst CIO in the West Africa region, the top priorities for CIOs and IT Managers are getting executive buy-in and support for strategic/innovative IT projects; obtaining budgets for IT investments and managing growing expectations and service needs. I strongly believe CIOs can take advantage of these challenges to re-invent themselves and be seen differently by the business. CIOs need to more from IT productivity to business productivity.
IDC had in different forum highlight the advent of disruptive technology with the 3rd Platform: Cloud, Mobility, Big Data & Analytics and Social technologies had impacted the way IT is consumed. This in itself provides both opportunity and a threat to CIOs and their IT Departments.
An opportunity, if the CIO takes advantage of these to reinvent his IT department by showing value beyond that been seen as a cost center to becoming a profit center.
And the 3rd platform could be a threat if The CIO does nothing other than “keeping lights on” and just maintaining IT systems. Some CIOs can hardly leverage IT to unlock real value and profit, and as a result, most businesses treat IT as a cost center, because that is what it is to them. CIOs need to take advantage of exploits in technology, knowing the business, knowing the business’ customers, working with partners and to growing profits, thereby maintaining their relevance to the organisation.
Already a new class of strategic IT organization is emerging, one that uses the business of the 3rd Platform in cloud, mobile, mixed-sourcing, strategic souring, and e-commerce as core components by delivering business services even better and cheaper than some IT departments.
How Can CIOs transform their IT Departments from a Cost Center to a Profit Center?
The process of transforming a cost center to a profit center is not a simple one, but it’s very achievable.
The first step in transitioning to a profit center is performing a gap analysis. IT leaders should take stock of what they really need to transit, that is, judge what the current position is and decide on the eventual goal of the department.
IT leaders must be certain to ensure that they identify and assess all barriers to transforming the IT department as well as discover what variety of the profit center model is most suitable to the company. Questions that could be asked during the gap analysis are the following:
• Is there a market or how can I create a market for the IT department to sell identified services to external companies?
• Do I have resources or partnerships to evolve the transition?
• Do O I have a sellable transition business plan to the business?
Take a stock of your IT investments in Licenses or infrastructure, there is a service you probably can compartmentalize and extend to provide and sell to small businesses?
CIOs and IT Managers may also consider a “Charge Back” model to internal sister departments within the corporate depending on the size and structure of the parent company.
A charge back method would strive to frame and describe the means in which an IT department’s sister departments can compensate IT for “extra” or “additional” or “add-on” services delivered e.g. Bring Your Own Device (BYOD) implementation for enterprise mobility.
Creating a charge back method requires participation from all of IT’s internal business partners. Developing a compensation or charge back has the potential to be politically explosive within a corporate, but the benefit to IT is that it can help dispel the notion that it is a cost center by enabling IT to prove that it can generate obvious revenue or at lease save significant cost by regulating technology consumption.
By charging internal business partners for IT services, IT would be able to clearly show the benefits their services provide. For bigger corporation where departments are responsible for their own IT budgets, IT departments need to determine competitive differentiation in delivering its services. Competitive differentiation in this context means that IT should realize that they are not guaranteed to win all contracts put up for bid by internal departments.
IT departments must ensure that they are competitive with their outside competition and must display this competitive advantage by completing projects in an efficient and timely manner.
It is important to know that transforming IT departments from cost center to profit center is a new paradigm that is essential because of the way technology usage is changing. While it may not be popular now does not mean it’s not worth considering.
One phenomenon that we already see putting threat on the job and relevance of CIOs and IT Departments is Business Process Outsourcing (BPO). It’s gradually permeating the IT space as well. Locally, we’ve seen where a whole IT department is outsourced.
You may argue that that is on bigger scale and only big companies can possibly do that. The truth is that when Cloud Computing is at its best, and regulations permit, small and mid-size companies may decide access ERP, CRM services from the cloud on a subscription basis and move from CAPEX to OPEX model as far IT is concerned.
Ten years ago, CIOUpdate.com columnist Sourabh Hajela states that “IT cannot work as a profit center because it fails to meet the requirements for a department to function as a profit center because of the following reasons:
• Revenues and costs: Accurately quantifying revenues and costs.
• Market: A focus on customer relationships that are generating higher profits and either discontinue or deemphasize those that aren’t.
• Product Mix: The creation of a portfolio of products and services driven by market demand.
• Product pricing: Price products and services to maximize profits.
• Timing: It is often said that, in business, timing is everything. Profit centers are profitable when they can quickly respond to a market opportunity.”
Mr. Hajela general surmises that IT departments cannot work as profit centers because of its close alignment with other business departments. “An ITO cannot work as a profit center because it has a captive relationship with its “customers,”
I am sure this suggestion by Mr. Hajela has been over shadowed by the advent of the disruptive technology in the 3rd Platform and the emergence of new models and options for businesses to consume.
In a short while, there will be an increasing pressure to transform IT Departments into a business, a revenue generating entity. CIOs should be prepared to answer the question, what kind of transformation makes the most sense for my business?
I’ll close this article with a quote from Charles Darwin that “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
Bola Adisa
Email: [email protected]
Phone: 07061547518
NLNG and the Nigerian Content Development and Monitoring Board (NCDMB) have commenced the construction of a research and innovation centre at Rivers State University, aimed at strengthening indigenous capacity in computer and electrical engineering.
The NLNG Research and Innovation Centre for Computer and Electrical Engineering (RICCEE), which was inaugurated yesterday, is the company’s largest Human Capital Development Institutional Strengthening project to date.
The centre is expected to provide specialised training, advanced research facilities and technological solutions for challenges in Nigeria’s energy and industrial sectors.
It will also house a professorial chair and operate as a research and development centre where industry-focused solutions, particularly for NLNG, can be developed and potentially commercialised.
Speaking at the groundbreaking ceremony, NLNG’s Managing Director and Chief Executive Officer, Adeleye Falade, described the project as a strategic investment in the country’s future and evidence of the company’s commitment to sustainable human capital development.
Falade, who was represented by NLNG’s General Manager, External Relations and Sustainable Development, Sophia Horsfall, said the facility would improve the university’s ability to produce highly skilled professionals while ensuring that research responds to industry needs.
He said the centre would also help bridge the gap between academic knowledge and practical industry requirements by creating opportunities for researchers and professionals to work together on innovations with commercial and developmental value.
Felix Omatsola Ogbe, the Executive Secretary of NCDMB, represented by the Director, Capacity Building, Abayomi Bamidele, said the project marked an important step in advancing the Board’s Human Capital Development objectives.
According to him, the centre is part of the Board’s Institutional Strengthening Programme, which seeks to build lasting partnerships with higher institutions through infrastructure that supports teaching, research, innovation and practical skills development.
Ogbe challenged the centre to emerge as a hub for discovery, creativity and technological advancement, where students can develop innovative ideas, researchers tackle real-world problems and industry can find reliable research and development partners.
The Vice-Chancellor of Rivers State University, Prof. Isaac Zeb-Obipi, said the project aligned with the institution’s 2026–2030 strategic plan, particularly its focus on research collaboration, innovation and entrepreneurship.
“We envisage the Centre as a world-class hub where researchers and students can develop practical solutions to engineering and technological challenges, where university-industry collaboration can flourish, and where innovative ideas can be transformed into useful products, technologies and services,” he said.
The centre will occupy about 9,336 square metres within the university and include specialised laboratories for electronics and signal processing, robotics and embedded systems, software engineering, and digital forensics and cybersecurity.
The facility will also feature solar energy provisions, energy-efficient lighting and other environmentally responsible systems designed to reduce operating costs and support reliable research activities.
RICCEE is one of NCDMB’s Institutional Strengthening Projects designed to improve learning institutions through modern infrastructure, research facilities, technical equipment and training aligned with industry needs.
General News
NITDA Seals Strategic Deals with Goose FL and Fireflies AI to Power $1 Trillion Digital Economy Vision
In a significant step toward expanding Nigeria’s tech footprint on the global stage, the National Information Technology Development Agency (NITDA) has signed strategic Memoranda of Understanding (MoUs) with Canadian tech companies Goose FL and Fireflies AI.
The signings took place during the Nigeria–Canada Investment Forum and the Nigeria Investment Economic Conference in Toronto, Canada, witnessed by NITDA’s Director-General, Kashifu Inuwa Abdullahi.
The strategic partnership centers on three core pillars designed to accelerate the nation’s digital roadmap:
- Expanding Financial Inclusion: Developing innovative technology solutions to broaden access to digital financial services and create sustainable economic opportunities for underserved communities.
- Deploying Local AI Infrastructure: Establishing indigenous Artificial Intelligence infrastructure and services to strengthen Nigeria’s internal capacity to build, manage, and benefit from AI technologies locally.
- Building a Stronger Digital Economy: Driving long-term economic growth through strategic global partnerships, technology transfer, innovation, and digital capacity development.
This international collaboration directly aligns with President Bola Ahmed Tinubu’s vision to grow Nigeria into a $1 trillion economy by 2030, anchored by innovation, digital technology, and human capital development.
By forging key global ties, NITDA continues to position Nigeria as a rising leader in the digital economy, ensuring that emerging tools like AI deliver real, tangible value for local citizens and businesses.
Anambra State Government says it is exploring partnerships with the Federal Government and other stakeholders to extend digital connectivity to underserved rural communities across the state.
The Managing Director and Chief Executive Officer of the Anambra State ICT Agency, Mr Chukwuemeka Fred Agbata, disclosed this during a virtual media engagement with journalists on Thursday.
Agbata said rural connectivity remained a major challenge because telecommunications operators were often reluctant to invest heavily in communities where network deployment might not be commercially viable.
He said the state was willing to explore opportunities to leverage Federal Government infrastructure and the Universal Service Provision Fund (USPF) to extend connectivity to underserved communities.
“We understand what digital inclusion means because we are dealing directly with these communities,” Agbata said.
According to him, the objective is to ensure that rural residents are not excluded from the benefits of digital government and the wider digital economy simply because of where they live.
Agbata said the effort formed part of the state’s broader digital transformation agenda, which is targeting deeper digitalisation of government services and a more digitally enabled business environment by 2030.
He said the second phase of the agency’s digital transformation agenda would focus on e-governance, digital infrastructure, smart government and the use of emerging technologies to drive development.
“My core vision is that we would have digitised every single government entity in Anambra State,” he said.
The ICT boss said the digital transformation agenda would extend beyond government ministries, departments and agencies (MDAs) to businesses and residents across the state.
He said the agency was already developing websites for government MDAs and transforming them from mere information platforms into channels for delivering government services.
“We are building websites for all the MDAs. We are also automating them to be able to carry out services and give government support and government services through their websites,” he said.
Agbata said the initiative would reduce the need for citizens to physically visit government offices to access basic services.
He said the Smart Anambra platform had already demonstrated growing demand for remote access to government services.
According to him, the platform recorded about 14,000 visits between July 9 and July 29, averaging approximately 700 visits daily, despite limited publicity.
He said the data indicated that residents were interested in accessing government services online, including applications, permits and identification-related processes.
“What the data is already showing us is that we really need to build a system that allows people to actually get government services remotely,” Agbata said.
He explained that the objective was to allow residents to initiate processes online, complete forms remotely and only visit government offices where physical presence was eventually required.
This, he said, would reduce the time and cost citizens spend travelling to Awka or other government offices to access services.
Agbata said services in areas including hospitals, schools and other government processes were being connected to Smart Anambra.
Anambra Targets 2030 for Digital Government
Agbata said the state’s 2030 target was to deepen the digitalisation of government services and create an environment where businesses could increasingly operate within the formal digital economy.
He said the agency was working with the Ministry of Commerce to promote the formalisation of businesses, particularly SMEs and businesses operating in major markets.
“One of the biggest challenges that we have is that SMEs are not formalised enough,” he said, adding that the agency was exploring partnerships to address the challenge.
The ICT agency boss said the transformation would be gradual because major government initiatives required the necessary approvals and resources.
On the possibility of making Anambra completely paperless, Agbata disclosed that the State Executive Council was already operating a paperless system.
He, however, said the entire civil service might continue to operate a combination of digital and paper-based processes for some time because of the complexity of government operations.
“What might happen is a dual situation,” he said, adding that selected MDAs could be used as pilots for deeper digital transformation.
Agbata also disclosed that the Anambra State ICT Agency had commenced the deployment of a locally trained artificial intelligence (AI) system to automate its operations and explore applications in governance, revenue management and public-sector productivity.
He explained that the agency did not develop a frontier large language model from scratch because of the huge computing and financial resources required.
Instead, he said, it adopted an open-source model, modified it and was training it for specific local use cases.
“We have started doing our own local AI system. It is an open-source system, so we didn’t build our own frontier model. We basically looked at open source and modified it, and we are training it,” Agbata said.
He said the system had already been deployed to automate the agency’s operations end-to-end.
“We have used it to automate our agency end-to-end. Everything that we do now is currently automated,” he said.
Agbata said the agency was exploring how the model could be applied across other areas of government to improve productivity, address revenue leakages and strengthen governance.
He said the AI initiative formed a major part of what he described as the agency’s “2.0” phase following his reappointment by Gov. Chukwuma Soludo.
According to him, the second phase would build on achievements in infrastructure, capacity development, e-governance and smart government while placing greater emphasis on AI and emerging technologies.
Agbata also said the state’s free public Wi-Fi initiative remained operational, stressing that the programme was introduced before the electioneering period.
“The free Wi-Fi didn’t start as a political thing, a campaign thing. It started way before the campaigns,” he said.
He explained that the strategy was adjusted during the campaigns to enable residents to follow the governor’s activities and participate in live engagements while on the move.
According to him, existing Wi-Fi locations, including facilities at the state Secretariat, remain operational, although occasional downtime occurs, particularly during periods of adverse weather.
“There are downtimes now and then because with the rains and all of that, these things have their uptime and their downtimes, but it is still very much available,” he said.
He disclosed that there were currently no plans to establish additional Wi-Fi locations, noting that existing sites were still providing services.
Agbata said the state would continue to develop digital skills and education programmes, including Smart Schools and other capacity-development initiatives.
He also called for stronger collaboration among government, technology companies, telecommunications operators, local technology manufacturers and other stakeholders to accelerate the state’s digital transformation.
He cited the procurement of about 2,000 computers supplied by indigenous technology company, Zinox, as an example of the state’s engagement with local technology providers.
Agbata said the agency would remain open to partnerships capable of supporting Anambra’s technology agenda.
He said the ultimate objective was to build an Anambra where residents and businesses could increasingly interact with government digitally, while technology becomes a central driver of economic development across the state.
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